SPRINGFIELD, Ill. (WTVO) — Illinois won’t tax forgiven student loan debt, but some other states, such as Wisconsin, plan to.
Those receiving student loan forgiveness would not be taxed federally, but some people could get taxed at the state level anywhere between $300 and $1,100.
President Joe Biden announced student debt cancellations of $10,000 for those who earn less than $125,000. People who received Pell Grants can get $20,000 forgiven.
Under the American Rescue Plan, the federal government will not tax student loan forgiveness again until 2025. Several states’ tax plans are coupled to the federal code, meaning changes at the federal level kick in at the state level. But states that don’t fall under that rule could come calling for a piece of the forgiven debt if they don’t amend their statutes.
In Mississippi, Minnesota, Wisconsin, Arkansas and North Carolina, forgiven student loans will be subject to state income taxes unless they change their laws to conform with a federal tax exemption for student loans, according to a tally by the Tax Foundation, a Washington, D.C.-based think tank.
Spokespeople for tax agencies in several states — including Virginia, Idaho, New York, West Virginia, Pennsylvania and Kentucky — told The Associated Press that their states won’t tax student loans forgiven under Biden’s program. Revenue officials in a few other states said they needed to do more research to know.
The Associated Press contributed to this report.